Guest column: Don't tax those who can't afford it

The year 2011 is supposed to be the year to support jobs, working families and small businesses in our state. Unfortunately, we’re off to the wrong start.

One of the first budget-balancing ideas from the new legislative leaders is to kill a jobs-producing tax credit that is a proven economic stimulant for local communities.

The Michigan Earned Income Tax Credit has been mischaracterized by legislative leaders as “paying people not to work” and a “welfare giveaway.’’

Unfortunately, they are speaking without the facts.

Here’s the truth: The tax credit helps low- and moderate-income working families (generally those earning $45,000 or less for a family of four). It goes only to those who work. It passed in 2006 with bipartisan support on a nearly unanimous vote.

The state credit is based on a federal credit that also has a rich history of bipartisan support. The federal Earned Income Tax Credit has been supported or expanded under presidents of both parties dating back to Nixon. President Reagan called it “the best anti-poverty, the best pro-family, and the best job creation measure to come out of Congress.”

Both the state and federal credits are designed to protect households from being pushed into poverty or deeper into poverty by taxing them. They are refundable, meaning that taxpayers can get more back than owed in income taxes, in an effort to offset other taxes, including payroll, sales and property taxes.

In 2006, the state Legislature created the Michigan tax credit, making it 10 percent of the federal credit in tax year 2008 and 20 percent in tax year 2009 and later.

The Michigan tax credit offers a lot of bang for the buck. For every $1, it produces $1.67 in economic activity, according to a 2009 study by the Anderson Economic Group.

Last year, more than 780,000 tax filers in Michigan claimed the state tax credit, including an estimated 13,000 in Jackson County. It pumped $338 million into local economies. In Jackson County alone, about $5.6 million was distributed.

Before the state tax credit was passed, Michigan was one of the worst states in the country for taxing people living in poverty. Now, however, Michigan is about average.

The Earned Income Tax Credit is one of a long list of state tax expenditures that total $34 billion. Many go to big corporations and were approved decades ago to encourage start-up industries. Michigan has no review process to see if they support jobs.

On the other hand, we have proof that this credit works. Killing it would put those at the bottom of the economic ladder first in line to help balance the state budget. That’s not a good start toward reaching the goals of moving families and small businesses along the road to economic recovery in our struggling state.

— Gilda Z. Jacobs is CEO and president of the Michigan League for Human Services.